OTTAWA/WINNIPEG, Manitoba (Reuters) - Canadian Prime Minister Justin Trudeau on Tuesday said Ottawa would soon announce help for canola farmers hurt by a China ban on imports of the oilseed but brushed off calls to pull funding for a Chinese-led investment bank.

FILE PHOTO: A canola crop used for making cooking oil sits in full bloom on the Canadian prairies near Fort Macleod, Alberta, July 11, 2011. REUTERS/Todd Korol/File Photo

China and Canada are locked in a diplomatic and trade dispute that has resulted in China blocking imports of canola seed from two companies. China, Canada’s biggest export market for canola, cited the discovery of pests, a charge Canada dismisses.

Trudeau, under increasing political pressure to settle the matter, made his remarks in the House of Commons. The Liberal government has already dropped big hints that it will boost programs that compensate farmers in times of hardship.

“We’re going to continue to stand up for Canadian producers ... (and) farmers and we will have good news to announce in just the next few days,” he said.

The opposition Conservative Party, leading in the polls ahead of a federal election in October, urged Trudeau to strike back by withdrawing Canada’s C$256 million ($191 million)contribution to the China-led Asian Infrastructure Investment Bank (AIIB).

“We believe in Canadian leadership around the world,” Trudeau said in response, saying the AIIB was focused on clean, green infrastructure throughout Asia.

Saskatchewan Premier Scott Moe, whose Canadian province grows the most canola, said he has asked Trudeau to increase the limit on a federal loan program for farmers.

Canola is crushed mainly to produce vegetable oil for use in foods such as salad dressing and margarine.

Moe, whose Saskatchewan Party is often allied with the federal Conservatives, said Trudeau should retaliate against China.

“A reciprocal trade relationship means we will treat our trading partners in the same way they treat our products. We have a challenge with canola right now sitting in boats in the harbor in China,” Moe said in an interview, adding he did not have specific Chinese products in mind for retaliation.

“We need to capture the attention of our trading partners.”

A trade war would pose further risks to Moe’s own province, as mining companies export large volumes of Saskatchewan uranium and potash to China.

The list of Canadian farm exports hitting obstacles at Chinese ports has expanded to peas and soybeans.

Reporting by David Ljunggren in Ottawa and Rod Nickel in Winnipeg; editing by Chizu Nomiyama and James Dalgleish